Expert Excerpt at LIBA #8:Wealth Creation through Investment by Mr Swarup Mohanty

When thinking about richness, wealth, and wealth creation, probably the first person who comes to every human mind is Warren Buffet. Among the wealthiest individuals in the world, he is regarded as one of the gurus to listen to when it comes to wealth creation. To quote him from one among his many great sayings, “If you don’t find a way to make money while you sleep you will work until you die!

For bright young minds aspiring to become the leaders of tomorrow, MBA students require a good deal of knowledge on the various aspects of wealth creation and management not only for themselves but also for those who can potentially trust them with their money. In an effort to educate them better, the students of Loyola Institute of Business Administration (LIBA), Chennai, had with them Mr. Swarup Mohanty to talk about the creation of wealth through investment. This was part of the institute’s “Beyond Management” initiative and the session was organized by the BMI Club of LIBA.

Mr. Mohanty spoke at length on how the concept of creating and maximizing wealth has not changed down the years. Till date, people look to invest their hard-earned money in various instruments to generate and increase wealth – sort of making the money do all the work for itself while improving their riches! As a subject, wealth is something very important and can be found in every walk of life. To define this term in the words of Robert Kiyosaki, “Wealth is a person’s ability to survive so many days moving forward. If you stopped working today, how many days will you survive?” Wealth is subjective when looked at from the point of view of time and does not always involve money, per se.

Understanding wealth is not an easy job and in order to do so, one needs to start by understanding the wealthy and how they amassed all that wealth. Long back, land happened to be the first real asset that was identified by man with gold and jewelry following suit. Kings would have zamindars or landlords in their kingdoms to manage these assets and help them in becoming wealthier, similar to the asset managers we see in the modern day. The munshi in the King’s court was the earliest person to ever resemble the modern day banker. Even today, land is looked upon as a valuable asset to invest in along with gold, and people expect to get good returns on such premium investments.

For those not willing to go big with land investments, there are many other options that have opened up to help them in improving their wealth. One of these is SIPs or a Systematic Investment Plan where an individual needs to invest a certain amount over a predefined time period and earn a certain return on their investment. Their investment is taken up by fund managers who put the money into equities and assure them of returns after a number of years.

Companies today are no different from the kingdoms of yester years. An owner’s valuation is reflected by the valuation of the company. In other words, it is the value of the number of stocks they own in the company that determines how wealthy they truly are, similar to the older times when kings and kingdoms would be judged by the wealth contained in their treasury. The kings of today are those who own equity!

Mr. Mohanty had a simple piece of advice for the students – anyone who feels he/she has the aptitude and capability to own stocks directly should do so. If they feel do not have the capability and aptitude but want to gain the skill, there are many forums and sites where knowledge about investing in the equity market can be gained. Technology has also made virtual trading possible where people get to invest in the live stock market with virtual money. Those who are not willing to gain that capability should look to invest through mutual funds.

Mutual funds are the only financial instruments where the risk of investment is rightfully shifted back to the investor. So if a person is losing money by investing through a mutual fund, the latter is not liable to compensate him for the losses just as they won’t be demanding a share of the profits.

However, society should be careful about the whole idea of amassing wealth. Money and wealth should not take control of an individual and make him shun his morals, values, and principles. It is worth noting that Indian society seems to be slowly slipping towards that stage where materialistic desires are driving everything else. One needs to look only at Brazil to understand what the greed for wealth can do to a nation. Once regarded as the next superpower, concentration of wealth in the hands of a few in the country led to its downfall and the country is now struggling to rediscover its economic growth and development.

When it comes to investing, an individual needs to have the right advice at the right time. It could come from peers, parents or relatives for these are the people who have the appropriate idea of investment. This guidance is what will be of help in driving the person forward towards building on their wealth.

Mr. Swarup Mohanty is the CEO of Mirae Asset Global Investments (India) Pvt. Ltd. He has over 21 years of experience in the industry, having worked with the likes of Kotak Mahindra Asset Management Company Ltd, Birla Sun Life Asset Management Company Limited, and Religare Asset Management Company Public Limited.